Circulars/Notifications - Banking Policy Department  
 BPD Circular No.16
May 03, 2003  

All Banks/DFIs

Dear Sirs/Madam,



The banks/DFIs are aware that in the present economic and business scenario in the World, the need for compliance of various laws and regulations has become imperative to protect the financial institutions from different kinds of risks.  In order to keep the activities of banks in compliance with the relevant laws and regulations, especially with regard to Know Your Customer (KYC), and other Anti Money Laundering Law rules/regulations, it has become necessary to appoint/designate a “Compliance Officer” (CO) in the financial institutions. While some of the banks, especially branches of foreign banks operating in the country, have already appointed/designated a Compliance Officer, the majority of the banks have not put up a compliance programme in place.

 2.      All Banks/DFIs will now have to put in place a Compliance Programme to ensure that all relevant laws are complied with, in letter and spirit, and, thus, minimize legal and regulatory risks.  For this purpose, the Board of Directors, or Country Manager in case of foreign banks, shall appoint/designate a suitably qualified and experienced person as Compliance Officer on a countrywide basis, who in turn will appoint COs down the line.  The COs will primarily be responsible for bank/DFI’s effective compliance relating to (a) State Bank Prudential Regulations, (b) relevant provisions of existing laws and regulations, (c) guidelines for KYC, (d) anti money laundering laws and regulations, (e) timely submission of accurate data/returns to regulator and other agencies and (f) monitor and report suspicious transactions to President/CEO of the Bank/DFI and other related agencies.  The Banks/DFIs are, however, be free to add other areas of compliance under the responsibilities of CO and consider setting up of a Compliance Committee under CO, as they may deem fit, to protect the interest of the institution.

 3.    The CO will (i) serve as a contact point between President/CEO and senior management, with regard to functioning of the compliance programme, (ii) provide assistance in this area to branches and other departments of the bank, and  (iii) act as liaison with SBP concerning the issues related to compliance.

 4.            Banks/DFIs are, therefore, advised to put in place, in writing, a complete programme of compliance down the line under the supervision of a Compliance Officer.  A compliance report in this regard alongwith name, contact and address of the CO and a copy of that Bank/DFI’s compliance programme may be furnished to SBP latest by 31st October 2003.

 5.         Please acknowledge receipt

Yours faithfully,
(Muhammad Kamran Shehzad)

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